OK, so on September 1, 2014, Tangerine started offering a rate that works out to 3% annually on new savings deposited between September 1 and September 15. It pays that interest rate until November 30, then it drops back to the usual rate, probably 1.3%. Of course, that encouraged anyone with a large cash balance elsewhere to put it into Tangerine. It didn’t take long before President’s Choice Financial came out with a competitive offer of 3.1% on new savings deposits made between September 3 and September 30: here are the details.

Why Do I Care Whether PC Financial Is Offering an Interest Rate Bonus for 3 Months on Savings?

When Tangerine announced its newest incentive to lure new customers we already had our savings largely in our Tangerine account. That meant our cash savings account money was only going to keep receiving the regular 1.3% interest rate. The Tangerine 3% rate only applies to deposits made which raise the total of your savings above the level they were at on August 31. (You can read the details of what they add up at the Tangerine website.)

So I waited for PC Financial to come out with a competing offer. Then I could simply transfer our cash savings (basically our emergency fund plus a bit for a home project that starts in the New Year) to our President’s Choice savings account.

Crickets chirped.

Sunrise. Sunset. (Cue Fiddler on the Roof.)

It wasn’t till I was reading a thread on RedFlagDeals about the Tangerine promotion that I found out that PC Financial HAD launched a competitive offer. They were NOT advertising it on their website nor by email to their customers; at least, not by September 8, 2014.

Ah ha! But as of today, September 9, the ad is up on the PC Financial website. Anyway….

What Is the PC Financial Bonus Rate Offer?

Well, I’m still trying to get the details in writing.

By telephone, we were told

They will add up all of your types of savings with them as of September 5, 2014. This would include your chequing account, savings account, TFSA and RRSP amounts. (It may include other amounts: check the details carefully.)

Interest will only be paid on the daily balance that is higher than this amount. (That’s the same rule as Tangerine.)

The new money must be deposited by September 30 2014 to qualify. Remember that the date it is deposited is not necessarily the date you make the transfer from another bank or the date you put a cheque into an ABM. It has to be processed and posted to your account before September 30. (That’s the same at Tangerine as well, although there the money has to be in your account by September 15.)

You must “enroll” to receive the offer. To do so, you must talk to an agent at their 1 888 723 8881 number (press 0 if you want to skip the tree of choices), by visiting a PCF pavilion or hub and speaking to the agent, or if you get one, by accepting the online banking invitation sent to your email.

The higher interest rate, which only applies to the money you deposit above the amount you had in your accounts September 5, applies until December 15, 2014. Any amount equal or below the amount on September 5 just earns the usual interest rate. For savings that’s about 1.3%.

You can now read the complete details at the PC Financial website.

How Did Our Chat with the Agent Go?

Well, once again we hit the “Primary Account Holder” stupidity. Only my husband can ask to have the interest rate promotion applied to our Savings account. I’ve ranted talked about this before: Can you believe my husband would OBJECT if I, the Secondary Account Holder, managed to get us a higher interest rate on our savings without him having to do anything?

The rate did get applied to our account. But I had to phone again to check if it was working because the “confirmation email” we were promised has not arrived yet, as of September 9. (We called on September 7.)

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Do you transfer your savings balance to capture the best possible rate in these days of ultra-low interest rates? Or would you rather skip the dim sum lunch you could buy with the additional proceeds and just leave your money parked in one bank? Please share your views with a comment.

That’s all very interesting, but what you don’t realize and what they fail to mention is the way they calculate the “bonus” interest. Rather than what you’d expect and what every other financial institution on the planet does, which is to calculate the interest on the daily closing balance above your starting balance, they average your balance over the entire promo period, which means every day your new money gets deposited past day 1, your yield will erode past the stated rate of 3.1%.

I’m not totally sure I follow your explanation but I think you’re saying that calculating the interest on the incremental balance, which will also reduce the yield significantly below 3.1% per annum, if you deposit after day 1 would still get you more money than the way they do it by using an average balance? Did you find this info on how PCF does its math on their website or did you have to talk to them to get the details? Either way, thanks for sharing your insight!

Now I’m really confused. I tried the math with what I thought you were saying, but I end up getting the same interest paid using an average balance, so I must not be understanding your comment.
Here’s my estimate.
Say you had a 28-day promotion period.
You didn’t increase your deposit from $100 (old balance at start of promotion) to new balance of $200 until the 5th day of the 28 day promotion.
A per annum rate of 3.1% is about the same as a daily interest rate compounding of .000083
So if you earned .000083 on the extra $100 for 24 days, you’d get 0.2001984 in extra interest.
If instead, they took the total of your daily closing balances for the 28 days and divided it by 28, you’d have had (5200/28)
or an incremental average balance of 85.71428571 each day
If that balance again earned interest at .000084 per day
you’d get 0.2001984 in extra interest, which is the same as before.
Are you saying they use the average balance differential but only for the days when your balance was over the initial? Then you’d only earn the interest for 24 days, not the full 28, which would result in less interest?

Either way, one thing the math proves is that these short term bonuses don’t earn you many actual spendable $$ unless you have a very large incremental balance!
(And if MJonM is around, perhaps you could clarify the math for me. I’ve been up nights nursing a sick child most of this week so I’m pretty sure my math skills are unreliable at best!)